Investment money is pouring into startups that carve out and deliver financial services digitally, and CEOs of banks and financial services firms have gotten “digitization religion,” said Lou Celi, CEO of Roubini ThoughtLabs, during a session at Oracle OpenWorld 2017. “But like every religion, there’s a heaven and a hell. It’s a question of whether institutions will respond fast enough to be relevant.”
While many financial technology startups (fintechs) were launched with an aim to disrupt banks, the vast majority now want to collaborate with them—and banks are ready to join forces so they can speed their digital evolution, said Sanjay Mathew, senior director of Oracle’s Industry Solution Group.
“Today, the time from experimentation to actual monetization of fintech technology is extremely long, and most fintech firms need a shorter time to market,” Mathew said. The new Oracle Financial Services Digital Innovation Platform, announced during the conference, facilitates those bank/fintech partnerships, enabling banks to safely and securely implement digital banking services developed by fintech firms at a far faster pace, drastically reducing the risk and time to deliver digital transformation.
Common Cloud Platform
The platform includes a comprehensive set of PaaS capabilities as well as an open API framework that gives banks and fintechs a common cloud platform on which they can collaborate.
Further, banks and financial services firms don’t have to go hunting for fintech firms; fintechs on the platform are curated by Oracle Fintech ScaleUP.
“With Oracle’s Global Fintech ScaleUP Program, we are reducing the pain of exploring these fintech possibilities for banks, and helping fintechs that have mature offerings to connect with banks through this open-API platform,” Mathew said.
Forging these partnerships is critical. In a new report, Wealth and Asset Management 2022: The Path to Digital Leadership, Roubini ThoughtLabs reports that 30% of institutions are doing partnerships with fintech firms and 21% are acquiring fintech companies, while 15% are going the route of buying or licensing fintech software. Only 14% are building fintech capabilities in-house.
The survey of 1,500 executives and managers at banks and financial services firms around the world found that 99% of investment providers are now in the process of digital transformation. But about a quarter of firms are just beginning their digital journey, and only 2.3% of firms are digital leaders—companies that have used digital technology to transform their processes, products, and customer interactions.
Their key focus areas in the next five years? Survey respondents expect their firms’ use of blockchain and AI to more than double by 2022. Other areas of big growth will be robotic process automation, web collaboration software, contextual marketing software, cybersecurity, and machine learning.
Oracle Financial Services Digital Innovation Platform offers Oracle Blockchain Cloud Service as well as a growing catalog of APIs from Oracle, banks, and fintechs aimed at solving real business problems in the financial services ecosystem.
Beyond Traditional Banking
“We now even have innovative banks that want to publish their services on the platform either for external innovators to consume and create new innovations or for other banks or fintechs to use as service,” Mathew said. “When banks start leveraging open banking to publish new services, they are going far beyond traditional banking to innovating with new business models and new revenue-generating services. This can help rapidly improve the return on the otherwise sleepy bank assets,” Mathew said.
This untraditional thinking is helping to fuel a rapidly expanding ecosystem. With many banks looking for technology partners, fintechs raised $5.19 billion from 251 deals in the three months ending in June—up from $3.75 billion a year earlier, according to CB Insights. The firm predicted that investments in VC-backed fintech companies could rise 19 percent from 2016 this year if the deal pace is sustained.
While many open banking platforms just offer a simple API layer, Oracle’s open banking platform is a full stack, built on an enterprise-grade IAAS and PAAS platform and integrated with the latest fintech innovations, he said.
“It’s not just APIs; it offers security, compute power, container services, API gateway services, database services, development cloud, DevOps, identity management, and integration services,” Mathew said. “Oracle’s open banking platform is a one-stop shop for global banking innovation from Oracle as well as leading fintechs, and we believe it can democratize access to digital innovation.”
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